Godfreys flags cash flow problems as takeover looms

Godfreys flags cash flow problems as takeover looms

Vacuum sales specialist Godfreys (ASX: GFY) has flagged potential cash flow challenges as Arcade Finance comes closer to acquiring the company.

On Wednesday night the listed company announced to the ASX that it is in the process of reviewing cash flow numbers, but the future looks bleak.

The groups says it expects to reveal cash flow issues next month.

"Preliminary indications are that the Godfreys business may, without further financial support, experience cash flow challenges in early July 2018," says Godfreys in an ASX statement.

"It must be stressed that these indications are based on a high level analysis by the new executive team, which is all that has been possible in the short time available. Work is currently underway to verify this position."

The company recently announced that it has a new executive team in place, including a new chief executive officer, John Hardy, and chief financial officer, David Lee.

The company says it has commenced discussions with its principal financier, 1918 Finance, about an extension on the limit of its existing $30 million senior debt facility.

According to Godfreys, 1918 Finance has agreed to consider the extension as long as Godfreys agrees to a substantial repayment proposal.

The cash flow problems are occurring within the context of a takeover bid of Godfreys by the company's 99-year-old co-founder John Johnston, who also founded Arcade Finance.

Johnston, who wants to reprivatise the embattled company, recently upped the ante of Arcade's bid for Godfreys to $13.7 million at 33.5 cents per share.

According to Wednesday night's ASX statement from Godfreys, Johnston and Arcade currently hold more than 80 per cent of Godfreys shares. Should Arcade reach 90 per cent of an interest in Godfreys, it will proceed to compulsorily acquire all outstanding shares under the compulsory acquisition provisions of the Corporations Act.

Godfreys listed on the ASX in 2014 at $2.75 and has slid in price ever since.

The company was founded before WWII and has been a staple in Australian vacuum sales for the last 70 years.

Shares in Godfreys are down 0.6 per cent to $0.33 per share at 10.04am AEST.

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